Amazon-Whole Foods tie-up could speed grocery transformation

  • Amazon-Whole Foods tie-up could speed grocery transformation

Amazon-Whole Foods tie-up could speed grocery transformation

News of Amazon.com Inc.'s (AMZN) bombshell $13.7 billion deal to buy Whole Foods Market Inc. Analysts at RBC Capital and Cowen, while not effectively downgrading the warehouse-club giant, did single out Costco as a potential casualty in Amazon's big push into physical retail of groceries. German discounters Aldi and Lidl are battling Wal-Mart, which controls 22 percent of the US grocery market, with each vowing to undercut whatever price the others offer.

"This will be a good deal for consumers, including those who might not have been doing business with Whole Foods in the past, either because of its positioning in the organic branding space or because prices have been seen as high", Hamrick said.

Amazon Go is a gran & go, checkout-free brick and mortar store that features a tracking system charges charging customers for items taken out of the store. Amazon might also be partial to companies whose retail footprints can easily double as Amazon order pickup locations and/or showrooms for the company's products. If Amazon decides to deploy this kind of tech, it's likely that it would use it in Whole Foods stores as well as its own physical stores.

Jefferies' Brian Fitzgerald provides some more in-depth analysis of the strategy behind the deal: We believe the WFM (Hold) acquisition would give a boost to AMZN's efforts with Fresh which was launched 10 years ago and operates in 20 metro areas in the USA and overseas.

"If Amazon can instill more efficiency in the Whole Foods supply chain, it will mean lower prices for Whole Foods customers", Smith said.

But it was Whole Foods that fell behind as shoppers found alternatives to the organic and natural foods it helped popularize since its founding in 1978.

Citi's analyst Brian Raymond said that "Whole Foods provides Amazon with a (primarily leased) 460 retail store footprint across 42 U.S. states, serving as distribution points and pick-up locations".

Elise Bauer, a food blogger in Sacramento, California, lives about five minutes from a Whole Foods store and shops there several times a week.

The UK and large parts of North America were set on retail market including the upmarket store Whole Foods as a bit part player, struggling for real cut through and profit generation. "It is a tsunami that will shake up and change grocery retailing". Numerous traditional retailers have experienced a significant decline in their business due to this phenomenon. "Now, Amazon can offer the critical ability to touch, see, hear and smell groceries, while creating a localized, national delivery network for better, fresher food, fast". Meanwhile, Amazon's issues with counterfeit goods make luxury a tough market to crack, Digiday reported. Why pay for food delivery elsewhere if Amazon is cheaper and easier? Chadha forecasts that Amazon will put pressure on grocery stores in general to lower prices.

According to Huang, it is hard for retailers without the speed of a technology company to catch up to firms such as his or Amazon. In fact, Farhad Manjoo from the New York Times thinks that one big reason for Amazon to buy Whole Foods is to figure out how to sell groceries online in a seamless way, something no one else has mastered. But at a minimum, this move could get Whole Foods into the online space much faster, in theory, than any other retail competitor.